Retail store chains, especially grocery chains, survive on high sales volumes and low profit margins. Accordingly, retail industries are constantly searching for cost effective mechanisms to reach consumers and encourage them to shop at a particular retail store. While radio and television advertising are available, and of course used, it is expensive and not particularly targeted.
Although the newspaper is the traditional and less expensive mechanism for advertising in the retail industry, newspaper advertising has many disadvantages. First, newspapers provide only limited (and expensive) space for relatively generic retail advertising, making it difficult to differentiate from other competing retail stores. Second, to reduce costs, retailers typically "shotgun" newspaper advertisements to "generic" consumers rather than direct them to any particular consumer group or need. Third, if multiple retailers use the same newspaper to advertise their goods, sensitive pricing information may potentially be leaked to competitors. For example, if one retail grocer is undercut by a single penny per pound on the price of a turkey at Thanksgiving time, that grocer could stand to lose several hundred thousand dollars in revenue.
Consequently, a less expensive, less restrictive, and more effective way for retailers to direct advertisements and other purchasing inducements to consumers must be developed. Encouraging retail store loyalty necessitates determining consumer needs which vary greatly across demographic boundaries. Therefore, there is a need to make direct marketing available to retailers.
Regional and national consumer demographics data available from Nielson and other agencies regarding consumer product movement is too general to be useful to specific retailers. Additionally, these agencies do not address product movement demographics in order to learn the particular needs and buying habits of people purchasing particular products.
Increased sales and customer loyalty may be obtained by offering a reward system. For example, the airline industry rewards loyal customers using frequent flyer programs. Attempts have been made to develop "frequent shopper" marketing and sales promotion services in retail sales. Some retail grocery chains, for example, provide coupons based upon consumer purchase amounts accumulated during a particular shopping transaction. Coupons tend to be for arbitrary goods which are not directed to any particular needs or interests of the specific consumer.
Other retailers reward frequent shoppers by distributing cards to customers who regularly purchase name brand goods manufactured by a particular vendor. Cards are used at participating retail stores to identify the customer and record purchases of particular brand goods and to award points based on the number of brand good purchases. Points are accumulated, and gifts may be selected by the card member from a catalogue.
Another card type service offered to retailers is the "Reward America Program" from Citicorp. Consumers received monthly rebates based on the number of brand name items purchased, e.g. buy three loaves of Wonderbread.TM. and receive $0.50; buy five loaves, receive $0.75; buy seven loaves and receive $1.00. The consumer receives quarterly rebate booklets and periodic statements showing how many items must be purchased to obtain rebates.
Unfortunately, none of these services address or meet the needs and interests of retailers. For example, many of these existing programs like the Reward America Program service develop "brand loyalty" rather than retail store loyalty. Moreover, the retailer does not own the underlying consumer purchasing data regarding frequent shopper purchases for particular brand products. As a result, the retailer lacks direct access to this information for use in advertising and promoting the retail store itself.
None of these services allow a retailer to identify particular consumer groups and particular consumer needs. For example, in the grocery retail business in the United States, double income families are pressed for time and show a trend toward less time being spent shopping and preparing meals. Retail grocers are challenged to provide incentives to encourage these kinds of shoppers into their stores. Targeted advertising would allow retailers to appeal to current public awareness of the need for natural and/or healthy foods. Identifying those shoppers having special dietary needs, e.g. medical problems and then marketing to those dietary needs may be particularly advantageous to retailers. Providing products that appeal to certain ethnic groups instead of offering generic grocery items may also be profitable.
Identification of such groups, targeting advertisements to the identified groups, and measuring the results of that advertising are primary goals of the present invention. An integrated system is required which allows individual retailers to determine buying patterns and habits of customers to determine customer needs and preferences with respect to retail products sold. Such a system must accumulate transactional data, provide meaningful analysis, and allow retailers to target specific consumers based on determined buying patterns and preferences with promotional and advertising literature tailored to preferences and needs. To achieve those goals, such a system must be capable of inputting and categorizing enormous amounts of consumer and product data, organizing that data in a logical fashion, and providing data analysis useful for marketing and advertising.
According to the present invention, the above-identified problems are overcome and the above-stated goals are achieved by providing a retailer or a retail chain with the ability to process transactional information involving large numbers of consumers and consumer products by gathering product information that uniquely identifies a specific product by type and manufacturer, grouping that product information into product clusters, and analyzing consumer retail transactions in terms of those product clusters to determine relationships between the consumers and the products. Product, consumer, and transactional data are maintained in a relational database. Targeting of specific consumers with marketing and other promotional literature is based on consumer buying habits, needs, demographics, etc. A retailer queries the relational database using selected criteria, accumulates data generated by the database in response to that query, and makes business and marketing decisions based on that accumulated data.
A method of the present invention further includes receiving consumer information describing demographic characteristics of various consumers, grouping consumers into consumer clusters based on specifically defined demographics criteria, and analyzing product transactions in terms of those consumer clusters to determine relationships between consumers and products. Using product and/or consumer clusters, a retailer determines relationships between products and consumers as well as the effectiveness of a particular product promotion.
Since the number of consumers and products far exceeds the number of consumer clusters and product clusters, the clustering technique of the present invention permits a manageable amount of data to be extracted from a much larger amount of transactional, product, and demographics data, maintained, and readily accessible in a database. Moreover, cluster parameters and definitions may be modified and redefined by the retailer without modifying underlying consumer and/or product information.
A system according to the present invention for optimizing retail marketing operations based on purchasing transactions of consumer products includes as basic components: a relational database, means for receiving consumer identifying data and product purchase transactional data, means for grouping that data into clusters of information based on predefined criteria, means for storing the cluster information in the database, and means for analyzing the stored cluster information to determine buying behaviors of retail consumers.
Point of sale terminals, such as (but not limited to) the checkout registers in a retail grocery store, record consumer purchase transactions typically by means of scanning the bar code label attached to the product. Although optical means for detecting this coded information is preferred, other mechanisms for reading this data could also be used, e.g. magnetic strip reading, etc. Recorded consumer purchase transaction information is communicated from the point of sale terminals to the receiving means.
A supervisory retail processor performs in an alternative aspect of the present invention an intermediary function between the point of sale terminals and the relational database system. The supervisory retail processor stores a master product list containing all valid product numbers, e.g. bar codes, for every product carried by the retail store. The transactional information received from the point of sale terminals is checked against the product list to ensure that the registered product numbers are valid. The supervisory retail processor then transmits the master product list and the transaction log to the system receiving means or repositioning.
A user interface at the retail store or at the supervisory retail processor allows a retailer to input specific queries to the system to retrieve particular types of information from the relational database. For example, these queries may relate to determining purchasing behaviors of retail consumers, determining the effectiveness of promotional efforts with respect to particular products, and ascertaining particular characteristics (demographics and otherwise) of consumers purchasing particular products.
Clustering is employed in a system of the present invention to associate consumer identifying data into a plurality of consumer clusters based on predefined consumer criteria. Similarly, products from the product list are assigned to product clusters based on predefined product criteria. A retailer may modify the predefined consumer and product criteria to dynamically alter the consumer and product clusters. Thus, huge amounts of data are stored, managed, accessed, and analyzed in an effective and practical way using clusters.
The system according to the present invention further includes a mechanism for gathering consumer identifying data and encoding that data into digital format. The encoded consumer data is transmitted directly to (or via the supervisory computer) the system receiving means. Consumer identifying data includes such things as consumer demographics, income ranges, product preferences and other characteristics. Once consumer identifying data are received, membership cards are issued to consumers with coded identifiers uniquely identifying a consumer. Point of sale terminals at retail stores detect consumer coded identifiers by scanning membership cards and associate identifiers with products purchased by a consumer at that point of sale terminal.
The present invention includes a printing subsystem connected to the analyzing means for printing promotional literature directed to particular consumers based on cluster information stored in the relational database. In one embodiment, the printing subsystem generates and directs relevant promotional literature to certain consumers using names and address lists from the relational database. Promotional literature may include, for example, advertisements, newsletters, and coupons. With the printing subsystem of the present invention, customized promotional information most relevant and most likely to be of interest to a particular consumer based on their buying behaviors and their demographics is included in targeted promotional literature mailed to that consumer.
Thus, it is a primary object among many other objects of the present invention to provide efficient creation and management of a relational database system readily accessible by retailers to effectively target specific consumers and consumer groups with relevant advertisement, promotional, and informational direct mailed media. These and other features and advantages of the invention will become clear from an inspection of the detailed description of the invention, read in conjunction with the drawings, and from the appended claims.